The United States manufacturing rate has dropped to it’s lowest level in two years. The Institute for Supply Management, a trade group of purchasing executives, reported Monday that its index fell to just 50.9 percent. This was the 23rd straight month of growth, however, this was the lowest report since July 2009.
The AP reported:
Manufacturing activity barely grew in July, falling to the weakest level since just after the recession ended.
The Institute for Supply Management, a trade group of purchasing executives, said Monday that its index of manufacturing activity fell to 50.9 percent in July from 55.3 percent in June.
It was the 23rd straight month of growth. But the reading was the lowest reading since July 2009 – one month after the recession officially ended. Any level above 50 indicates growth.
New orders shrank for the first time since the recession ended. Companies slashed their inventories after building them up in June. Output, employment, and prices paid my manufacturers all grew more slowly in July.
The disappointing report on manufacturing is the first major report on how economy performed in July. It suggests the dismal economic growth in the first half of the year could extend into the July-September quarter.
“The ISM manufacturing report for July is a shocker and strongly suggests that the disappointing performance of the economy in the first half of the year was not just temporary,” said Paul Dales, a senior U.S. economist for Capital Economics.
Stocks fell after the report was released. They had risen ahead of the report on the expectation that Congress will approve a deal Monday to increase the nation’s borrowing limit. The Dow Jones industrial average fell 60 points in early-morning trading, and broader indexes also declined.
In a separate report, the Commerce Department said builders began work on more projects in June, pushing construction spending higher for a third straight month.
Construction spending rose 0.2 percent in June, to a seasonally adjusted annual rate of $772.3 billion, the government said. But even with the gains, spending remains slightly above an 11-year low hit in March and is just half of the $1.5 trillion pace considered healthy by most economists.
The economy expanded at a dismal 1.3 percent annual rate in the April-June period after an even worse 0.4 percent increase in the first three months of the year, the government said Friday.
The factory sector has expanded in every month but one since the recession ended in June 2009. The ISM’s index topped 60 for four straight months at the start of the year.
But manufacturing has stumbled in recent months. A parts shortage stemming from Japan’s March 11 earthquake disrupted automakers’ supply chains, cutting into the output of new cars. And high gas prices left Americans with less money to spend on discretionary items, such as vacations, furniture and appliances.
The index fell in May to 53.5 from April’s reading of 60.4. That was the sharpest one-month drop since 1984.